OPSM Purchasing

A corporate travel department determines that employees have been staying in 15 different hotel chains. The Director of Corporate Travel mandates that travelers may only stay in four designated hotel chains. This action is an example of: a. standardization. b. simplification. c. buying by brand. d. buying by brand or equal. specification by physical characteristics.

b. simplification.

Supply's growing involvement in the acquisition of services may be explained by: a. declining technical knowledge of internal users of services. b. the high dollars spent on services and the opportunities to reduce costs. c. the growing respect for supply managers as equals in the organization. d. the need for more of a personal relationship with the service supplier. e. the fact that price and service-delivery requirements are complex.

b. the high dollars spent on services and the opportunities to reduce costs.

The decision to make or buy a good or service is: a. a decision of strategic importance that deserves careful evaluation. b. a one-time decision never to be reconsidered. c. primarily an operational decision. d. the same as deciding to insource or outsource. e. typically made by the chief supply officer and his or her executive team.

a. a decision of strategic importance that deserves careful evaluation.

Capital assets: a. are not bought and sold in the regular course of business. b. have an expected use of less than one year. c. have little or no effect on the organization's operations. d. are generally expensed. e. are acquired for fairly small sums of money.

a. are not bought and sold in the regular course of business.

To assist in determining what represents acceptable value, a buyer is likely to: a. identify the function of a good or service. b. provide the mathematics for a suitable inspection program. c. purchase a branded item. d. disallow supplier substitutions for the specified item. e. avoid involving engineering in need identification and specification.

a. identify the function of a good or service.

Some of the concerns about outsourcing are: a. layoffs, exposure to supplier's risks, and loss of control. b. supply's ability to provide the required inputs at the right quality and price. c. transitioning from supplier's operations to internal operations. d. losing long-term buyer-supplier relationships and cost advantages. e. loss of a lean enterprise as the supply base grows.

a. layoffs, exposure to supplier's risks, and loss of control.

A procurement outsourcing contract that covers approval workflow, material acquisition, purchase order, expediting, material and invoice receipt, invoice payment, financial performance, compliance management, policies and procedures, and performance and results reporting is called: a. procure-to-pay (P2P). b. procure-to-contract (P2P). c. source-to-contract (S2C). d. source-to-pay (S2P). third party logistics (3PL).

a. procure-to-pay (P2P).

Early supply involvement means: a. supply considerations are included during need identification and specification. b. supply managers lead new product development teams. c. internal customers are encouraged to regularly interact with suppliers. d. internal customers are empowered to evaluate and select suppliers. e. accounting staff are located in the purchasing/supply department.

a. supply considerations are included during need identification and specification.

Deciding what represents a core competency in an organization is: a. always the same for companies in the same industry. b. often a fairly complex decision and a function of many factors. c. a fairly easy decision once organizational goals and objectives are known. d. a decision best left to the organization's Board of Directors. e. a decision best left to the Chief Executive Officer.

b. often a fairly complex decision and a function of many factors.

Supply managers believe they can add the most value to the outsourcing decision by: a. advising the outsourcing team on relevant contractual terms and conditions. b. providing a comprehensive, competitive process. c. reviewing the analysis conducted by the outsourcing team. d. being available if the internal users want their assistance. managing the contract once the decision has been implemented.

b. providing a comprehensive, competitive process.

New technology: a. seldom contributes to competitive advantage or operational efficiency. b. seldom enables competitive advantage from product/service differentiation at lower cost. c. frequently enables competitive advantage from product/service differentiation at lower cost. d. frequently enables competitive advantage from product/service differentiation, but typically at a higher cost. e. frequently enables operational efficiencies, but seldom enables competitive advantage.

c. frequently enables competitive advantage from product/service differentiation at lower cost.

Subcontracts can only occur: a. in government procurement. b. when a lead contractor is behind schedule. c. if there is a prime contractor bidding out part of a job. d. if substitution is required after the specification has been set. e. when purchasing a good, not a service.

c. if there is a prime contractor bidding out part of a job.

An advantage of buying by performance or function over other specification methods is that it provides: a. an opportunity to purchase identical requirements from a number of different sources of supply. b. evidence that the buyer has carefully defined the need and how it may be satisfied. c. the opportunity for the potential supplier to establish how to make the most suitable product/service. d. a standard for measuring and checking materials as supplied. the potential for equitable competition by ensuring that the suppliers are quoting for exactly the same material or service.

c. the opportunity for the potential supplier to establish how to make the most suitable product/service.

When a team has decided that a task or function currently performed by company employees is a core competency, the team will probably recommend: a. outsourcing. b. insourcing. c. offshoring. d. continuing to make. e. continuing to buy.

d. continuing to make.

Outsourcing of services is: a. decreasing in volume, but increasing in scope. b. decreasing in volume and scope. c. increasing in volume, but decreasing in scope. d. increasing in volume and scope. about the same in volume and scope over the last decade.

d. increasing in volume and scope.

Outsourcing: a. occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing. b. decisions are based on financial factors that most organizations can easily access through their accounting system. c. usually results in increased hiring to attain expertise that the organization does not already possess. d. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities. e. is a low risk venture because the firm can always revert back to performing the function in-house at low cost.

d. may reduce or control operating costs, improve focus on core competencies, and gain access to world-class capabilities.

A request for quotation that asks for a "brand or equal": a. is one way internal users ensure that they will get the brand they prefer. b. is the least risky and lowest cost approach to attaining "best value." c. requires the buyer to assume the costs of developing detailed specifications. d. shifts responsibility for establishing equality or superiority to the bidder. e. shifts responsibility for establishing equality or superiority to the specifier.

d. shifts responsibility for establishing equality or superiority to the bidder.

When a specification is widely known, commonly recognized and readily available to every buyer, it is called a: a. common specification. b. individual specification. c. universal specification. d. standard specification. e. market grade specification.

d. standard specification.

In an outsourcing decision, developing and negotiating the outsourcing contract: a. is not an area where supply managers believe they can add value. b. is the biggest area where supply managers can affect organizational strategy. c. is less important than ensuring prompt payment to suppliers. d. is best left to the function most directly affected by the outsourcing decision. e. is of less strategic importance than identifying opportunities for outsourcing.

e. is of less strategic importance than identifying opportunities for outsourcing.

Purchasing by specification typically occurs when: a. a high degree of supplier expertise is required and difficult to define. b. the internal user's preferences are impossible to overcome. c. the buyer wants the supplier to decide how to make the most suitable product. d. a supplier holds a needed patent. e. there are multiple sources for an identical requirement.

e. there are multiple sources for an identical requirement.